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How Can IT Startups Improve Energy Efficiency?

The latest progress in big data analysis has enabled remarkable development of a group of internet startups which can dramatically change the energy efficiency sector.

It mainly consists of web-based platforms that can track and analyse energy consumption data in real-time. These platforms give the possibility to quantify the results of energy efficient technologies implementation. The ability to model and evaluate various implementation scenarios makes energy efficiency projects more attractive to investors.

Over the past decade we have seen young Internet companies radically change our lives: the ways we buy, travel and communicate were completely modified. Business applications and professional software are dramatically changing the environment both of small companies and large corporations. However, the concentration of internet startups in different spheres is not equal. For various reasons, some spheres attract a large number of new companies, while others developing more slowly.

Until recently, IT startups in energy sector have been acting mostly in smart grid industry or developing some specific applications to optimize or automate different technological processes.The main reason for this is the orientation of the energy sector towards physical technologies. Generally, young companies focus on the development of new equipment, or improvement of existent technologies and processes. As a result, the number of IT startups developing new business models in the energy market is hundreds of times lower than in ​​financial services, for example.

But, today we can see the first changes brought by information technologies in energy efficiency. Created in the mid-2000s, the first startups in data processing and real-time analysis of energy consumption can dramatically change the entire energy efficiency sector. Most of these startups have developed the web-based platforms that track and analyze energy consumption data coming from utilities and their customers (owners of commercial real estate, industrial businesses, and individuals). Then, depending on business model, companies provide to different customers various services for energy costs reduction.

Here’s a list of some promising startups using different approaches in their energy management platforms:

FirstFuel is developing an internet platform that enables utilities to make on-line energy audit of commercial buildings. The utility provides energy usage data as well as the building’s address. FirstFuel uses satellite imagery to determine location, surface and architecture of the building. The software generates a detailed 3D map of the building to understand its typical installations. Combining this information with the local climate data, the platform makes deep analytics of the whole building’s energy consumption across different categories such as cooling, electric heating, lighting, pumps, and plug usage. Based on this analysis, the software gives the practical efficiency recommendations that can lead to energy savings.

Retroficiency’s Software-as-a-Service (Saas) platform enables energy service providers and utilities to analyze the efficiency of commercial office buildings and determine the most cost-effective repairs and retrofits. The platform examines data and characteristics of the building in question, such as general power loads, utility bills, square footage, age of construction, use and occupancy, weather, climate, number of pumps, boilers, air conditioners, data received from different types of sensors installed in the building, etc.

Retroficiency has created a database that contains more than 2000 specifications of various building structures, which allows comparing potential retrofit of the target building with the same buildings situated in the similar conditions. The platform replaces the massive amount of manual measurements and time consuming work that energy services companies, building owners and property managers usually make during energy audit. The system can evaluate thousands of energy efficiency measures in minutes.

The major customers of this service are building owners who want to reduce energy costs and energy service companies that provide different energy efficient technologies. In two years two years Retroficiency has identified more than 1.5B kilowatt hours of annual energy savings across 350M Square Feet.

The software tracks automatically energy consumption data at the enterprise-level, analyses it and makes decisions about what method of energy efficiency could be profitable in this particular case. The three basic modules of the software are ‘Insight’, which will report enterprise-level energy performance, and analyze energy investment broadly in terms of a percentage of the organization’s operating profit, “Modeling, Forecasting and Budgeting” that allows organizations to model best and worst-case enterprise-level energy cost scenarios, based on a range of internal and use and pricing variables and a module “Efficiency Planning and Optimization” which supports top-down target setting for energy efficiency and cost savings objectives, enforcement of ROI calculation disciplines, and advanced project portfolio analysis.

The main customers that benefit from Hara’s platform are those companies which spend millions of dollars on energy: oil and gas companies, or companies with large-scale supply chains like Dell or Walmart.

Verdiem has developed SURVEYOR software, which increases business profitability and sustainability by monitoring, measuring and managing IT energy use and related greenhouse gas emissions. Verdiem helps large organizations to reduce operating costs of the use of IT devices such as personal computers, printers, IP-telephones. More than 700 corporations, government agencies and educational institutions have deployed Verdiem on over 2.5 million devices. Most customers experience payback within 6 to 12 months.

Opower is the world’s leading provider of customer engagement solutions for the utility industry. Opower is developing an engagement platform that enables utilities to involve their customers in energy efficiency programs.

Opower’s business model is based on behavioral science. In the early 2000s psychologist Robert Cialdini made a research to understand what motivates people to reduce their energy consumptions. He found that neither money safe, nor environmental protection, nor the fact to be a good citizen motivate people to safe energy. But people begin to reduce energy consumptions when their neighbours start doing it.

Opower’s software analyzes energy data provided by utilities, third parties and consumers themselves. Then it mails to customers a detailed colorful report that shows how they are doing with their energy usage compared to similar homes in their neighborhood. Analyzing consumption data Opower helps families to make smarter decisions about their energy use and suggest how people can save energy and money. Finally, people become more energy efficient. From 2007 to 2013 platform Opower helped to reduce consumption by 1 million MWh. For 2013 the company covers over 15 million homes.

Company’s main customers are utilities which hires Opower to prepare home energy reports for their customers. At the same time it is not evident why should utilities pay somebody who helps them sell less energy to their customers? Opower’s Senior Vice-President Nandini Basuthakur explains that: “Efficient customers are more engaged customers. They are less likely to go to a different utility. And more likely to buy more products from their existing supplier.”

Besides, more and more countries push their utilities to be more energy efficient. For example, the EU has recently adopted the Energy Efficiency Directive which, among other things puts a 1.5% annual energy savings obligation on energy suppliers.

Simple Energy uses social medias to change how people save energy and how utilities engage customers. Company engages people in energy savings by means of platforms they already use, including email, Facebook, web and mobile applications. Simple Energy transforms energy use data into a scoring system that allows people to compete with their friends and neighbors online. Simple Energy encourages people to become interested in their own energy use and take action to reduce consumption. Company’s recent results show that the platform can produce an average energy savings of 20% with up to 50% for top performers.

Ikehu DRIVETM System provides incentives to residential customers in order to reduce power consumption during critical peak hours. The service gives electric utilities the ability to offer airline miles as an incentive for responsible energy use. The system includes a management console that provides utilities with access to a cloud based service. This service will handle all of the details related to sending incentives, provide real time status of offer accepts, and validate miles earned.

The examples mentioned above are the hottest startups, or those that use the most innovative business models. However, there are much more young promising companies on the market developing their own platforms and software, such as EcoFactor, Bidgely, PlotWatt, WegoWise, Honest Buildings, GridNavigator to mention the few. The vast majority of energy management platforms are focused on energy efficiency in building and industry sectors. The main reason for this is that these two sectors represent over 70% of the global energy consumption.

It’s worth mentioning that one of the key factors in energy platforms development is the emergence and improvement of measuring instruments, such as smart meters, sensors, actuators, controllers and others. New types of sensors enable to measure different kinds of data, allowing platforms developers to improve and expand their systems. Fortunately, the rapid growth of energy management platforms stimulates appearance of new manufactures of measuring equipment. Consequently, this encourages companies to innovate and lower their prices. Traditional players on this market are large companies such as Honeywell, Johnson Controls, Schneider Electric and Siemens. The most notable startup is Nest Labs that has created a new, learning, self-programming thermostat.

How Can IT Startups Change The Energy Eficiency Market?

Along with the direct cost reducing, energy management platforms may become a link between all participants of the energy efficiency market: energy suppliers, consumers, developers of energy efficient technologies and investors.

With real-time data analytics, utilities can optimize energy supply, reduce peak electricity demand and engage their customers in energy savings. Consumers are able to reduce energy costs by implementing the optimal energy efficient technologies, the payback period of which can be estimated online. Technology developers can enhance existing and create new equipment and services corresponding to the market demand and customer’s needs. Moreover, the assessments made by energy management platforms allow developers to attract more investments for their projects. Investors in their turn get a tool which helps them more reliably assess the return on investment of new energy efficient technologies.

Considering the geography of energy management platforms, we can see that today most of the companies are concentrated in the U.S. The reason for this is firstly the high market demand for these services (according to Accenture, in the United States only smart buildings could save businesses $25 billion a year in energy costs); secondly a strong entrepreneurial culture in startups founding and venture capital financing; and thirdly the federal government support of energy innovation (for example,ARPA-E program that advances high-potential, high-impact energy technologies that are too early for private-sector investment). However some of the mentioned startups have started to enter the European markets, where in turn we can already find a number of local startups developing energy platforms. Taking into account strict EU’s policy in energy efficiency, we can saywith great confidence about the future growth of the energy management platforms in European countries.

Energy management platforms have also a big potential of development in developing countries, especially in India and China, where sustainable energy supply and energy security are one of the main issues of the following decades. Certainly, today it is too early to talk about the beginning of rapid growth of such platforms in developing countries. However, internet technologies have repeatedly shown their ability to spread all over the world in just a few years. The rapid growth of Internet users in India and China, whose number in the coming years could exceed 1 billion, as well as the need of energy savings measures, can stimulate the future development of energy management platforms in the developing countries.